In the context of globalization and the existence of a common economic space in Europe, all commercial structures are faced with the need to standardize reporting. In this regard, accounting in the Czech Republic has already switched to international rails, so the financial statements of Czech companies will be understandable to most foreign specialists in the field of economics and audit.
Accounting principles in the Czech Republic
Entering the European Union, the Czech Republic agreed that it would have to significantly reform not only customs and tax legislation. The changes were supposed to also affect the accounting policy for the assets and liabilities of companies operating in the Czech Republic.
The basic principle of maintaining double entries remained unchanged, however, national accounting standards had to be rewritten, while some companies were forced to switch to reporting in accordance with international IFRS standards.
The basic principles of the updated accounting are:
- static - fixing the property status so that reporting users can always be sure that the full implementation of all stocks and fixed assets will cover the current accounts payable;
- dynamics - continuous analysis of the efficiency of economic activity, control over the ratio of income and costs, as well as over the formation of tax liabilities;
- focus on macroeconomic indicators - building accounting in such a way that the financial indicators of an individual enterprise can easily form national indicators of GDP and value added.
Formal accounting in the Czech Republic does not imply unified management reporting, since this part of the company's economic activities is always hidden in accordance with the requirements of confidentiality and trade secrets.
What economic entities are required to maintain accounting records in the Czech Republic
The Czech accounting law (Zákon o účetnictví č. 563/1991 Sb.) Outlined a range of subjects for whom the fulfillment of its requirements is strictly mandatory:
- legal entities registered in the Czech Republic;
- foreign companies and entrepreneurs operating on Czech soil;
- private entrepreneurs registered as VAT payers, whose annual turnover exceeds 25 million kroons;
- branches and separate unbalanced subdivisions of legal entities;
- individuals who have decided to keep standardized records on a voluntary basis.
Each of the entities listed above is obliged to keep records and postings, focusing on the national chart of accounts, and at the end of the financial year, provide the following reporting:
- annual balance sheet;
- profit and loss;
- applications (about cash flows, about changes in the structure of assets and capital, etc.).
The law provides for the possibility of filing simplified reporting and refusal from an audit for those companies that have not achieved any of the indicators:
- for annual profit - no more than 40 million kroons;
- turnover - no more than 80 million kroons;
- by the average number - no more than 50 employees.
Firms that issue securities traded on international exchanges, branches of foreign companies, and consolidated market participants must submit full financial statements based on IFRS.
List of main types of financial statements and declarations
All legal entities and individuals obliged to maintain accounting records submit financial statements to the Commercial Register (Obchodní rejstřík) once a year.
The minimum list of reporting documents includes:
- balance - Rozvaha;
- profit and loss data - Výkaz zisků a ztrát;
- Appendices and explanations - Příloha k účetní závěrce.
With regard to tax reporting, everything is somewhat more complicated, especially if the company is registered in the register of VAT payers.
Most economic operators in 2021 must submit reports to the Czech Financial Authority (Finanční úřady) electronically through state electronic mailboxes (datová schránka):
| Title of the report or declaration | Periodicity | date of application | Online form to fill out |
|---|---|---|---|
| Income tax of legal entities and individuals | Once a year | Until March 31 | https://adisepo.mfcr.cz/ - for individuals https://adisepo.mfcr.cz/ - for businesses |
| VAT declaration | monthly | By the 25th day of the month following the reporting month | https://adisepo.mfcr.cz/adistc/adis/ |
| Calculation of social deductions for compulsory insurance from salaries of hired personnel | monthly | By the 20th of the month following the reporting month | Information from the employer: on the calculation of payments for health insurance (VZP) - Přehled o platbě pojistného na zdravotní pojištění zaměstnavatele (VZP) and on the amount of insurance premiums - Přehled o výši pojistného a vyplacených dávkách |
If a company owns property or uses transport in its activities, then the list of reports and tax payments can be expanded.
The cost of accounting services for foreigners
Foreign investors are welcome guests in the Czech Republic, they are provided with benefits and special programs have been developed to reduce the tax burden. But this does not relieve foreign businessmen from the need to keep records of financial indicators and submit reports in a timely manner.
For those who cannot even find the Charles Bridge in Prague the first time, it is very difficult to immediately understand the system of financial statements and tax returns.
Newcomers come to the aid of firms that are ready to develop an accounting policy for a new company, establish or restore accounting, and also serve a legal entity or entrepreneur on an ongoing basis.
Such offers may come both from Czech companies and from Russian ones that provide accounting services abroad.
The cost of such assistance depends on the status of the taxpayer, its turnover and the degree of involvement in the client's internal affairs:
| Frequency of calls per year | Features of doing business | Estimated cost |
|---|---|---|
| Once a year, to prepare reports and streamline primary documentation | Customer with zero turnover | About 300 euros |
| Once a year, to prepare reports and streamline primary documentation | Activities were carried out during the year, but without hired personnel | From 400 euros - depends on the number of transactions |
| Monthly maintenance, depending on the number of operations | Customer - VAT payer | From 3000 CZK / month + 3000 for registration (one-time) |
| Monthly maintenance, depending on the number of operations | Client - non-VAT payer | From 2000 CZK / month |
| Serving companies with employees | In addition to annual or monthly maintenance fees | 500 EEK per month for one employee + 3,000 EEK one-time for registration of each of them in the social insurance system. |
It is up to the taxpayer to decide which type of cooperation to choose and to whom to entrust accounting.
Perhaps, after long reflections on this topic, the businessman will decide that it will be more convenient for him if the company has its own accountant. However, it can be unambiguously stated that without professional service it will not be possible to avoid penalties for errors in the reporting of the company.
Delegation of accounting responsibilities
Among the foreigners who organized their business in the Czech Republic, there is a rather high percentage of those who, instead of forming their own accounting service, transferred these responsibilities to outsourcing.
The reasoning behind this decision is simple and obvious:
- the cost of salaries and training of its own staff for a small company will cost more than the cost of an agency providing accounting services;
- continuity of service (without holidays and illnesses);
- saving time and legal support for those who are not familiar with the intricacies and regulations of tax legislation.
In this case, the only significant risk for inexperienced taxpayers is to trust a company with a low level of qualifications or outright fraudsters. However, the recipe for success is simple: use the services of only trusted agencies with a good reputation and not save too much.
What is the difference between accounting in Russia and the Czech Republic
For those who nevertheless decided to master the basics of Czech accounting, good news awaits: the differences in accounting and tax accounting in the Czech Republic and Russia are much less than similarities.
Of course, the plan and account numbers of analytical accounting are not the same, but the logic of double entries remains.
The list of the main fiscal obligations, reports and deadlines for their submission is very similar to the Russian one: income tax, personal income tax, VAT and insurance premiums.
And, although the rates of tax payments differ, this did not prevent the governments of the two countries from signing an agreement to prevent double taxation of their citizens.
Conclusions
Ideally, when deciding to move to the Czech Republic, a person should spend a lot of time studying the legislation of a foreign country. But in practice, the strength is enough only for a superficial acquaintance with the way of life and the basics of the spoken language.
Perhaps this is quite enough for initial commercial success, but clearly not enough for communicating with the tax authorities. Therefore, the most acceptable option for foreigners would be to contact local accounting professionals. At least at first.
